Seattle: Microsoft Corp's quarterly profit fell a greater-than-expected 22 percent, as sales of computers running its Windows operating system dipped and some revenue was deferred ahead of upcoming releases of its core Windows and Office products.

Sales of PCs are expected to fall this year for the first time since 2001, according to research firm IHS, due to the weak economy and inability of the latest crop of lightweight laptops to compete with Apple Inc's iPad.

Microsoft is betting the release of touch-friendly Windows 8 will rev up sales of PCs, laptops and Windows-compatible tablets as soon as it launches next week, and break Microsoft's heavy reliance on PC sales for profit.

"I don't control the macro-environment, but there's a huge opportunity in the explosion of devices," Microsoft Chief Financial Officer Peter Klein said in an interview. "There's demand for compelling devices and a connected set of cloud experiences. That's what Windows 8 is all about."

STEEP DIP

Microsoft, the world's largest software company, said fiscal first quarter profit fell to USD4.47 billion, or 53 cents per share, from USD5.74 billion, or 68 cents per share, in the year-ago quarter.

Wall Street had expected earnings of 56 cents per share, according to Thomson Reuters I/B/E/S.

Sales fell 8 percent to USD16.01 billion, largely caused by the dip in demand for personal computers running Windows, as consumers held off new purchases in the tight economy or opted to buy tablet devices instead.

The revenue decline was exaggerated by Microsoft's deferral of some USD1.36 billion in revenue, chiefly from its Windows unit, which it will regain next quarter after Windows 8 is launched.

Analysts, anticipating the dip in PC sales and accounting for the deferred revenue, had called for sales of USD16.4 billion.

On the positive side for Microsoft, its fast-growing server and tools business - whose datacenter 'cloud' services are in high demand - posted a 12 percent jump in operating profit to USD1.75 billion. Its perennially money-losing online services unit - containing the Bing search engine and MSN portal - narrowed its quarterly operating loss by 29 percent to USD364 million, as it increased its share of the search advertising market and cut costs.

"Investors were not expecting a home run. All expectations are on the launch of Windows 8 and the entrance into the tablet market," said Daniel Ives, analyst at FBR Capital Markets. "In light of the environment, the macro and PC situation, these are respectable numbers."